With eye toward future, Shipyard Brewing expands to survive

PORTLAND, Maine — Considering Shipyard Brewing Co.’s inauspicious start as a real estate deal gone bad, it would have appeared unlikely the business would grow into one of the country’s largest craft breweries, on the verge of expanding its distribution to Europe, and a major employer in Maine.

In 1992, Fred Forsley, who was a real estate broker at the time, stepped in to help manage a property in Kennebunkport that was in trouble. Forsley recently had met Alan Pugsley, a British brewer, and the pair decided to found the Kennebunkport Brewing Co. and Federal Jack’s Restaurant and Brew Pub on the site.

“I never thought I’d end up owning a brewery, that’s for sure,” said Forsley, 52, adding that without the expertise of Pugsley, who he called a “world-class brewer,” none of it would have happened.

And much has happened since those early days. Today, Shipyard Brewing employs 600 people in Maine, including at its numerous restaurants and brewpubs, during the peak summer season. It’s by far the largest craft brewery in Maine, and the 16th-largest in the country, according to the Brewers Association, a national trade association that represents brewers. Its annual revenue surpass $10 million, Forsley said.

The business has grown to encompass much more than beer. Forsley and his cousin Bruce Forsley, Shipyard’s director of sales and marketing and part owner of the brewery, also own restaurants, brewpubs, a line of soft drinks, and even a wine importer.

“All these businesses are tied to Shipyard. They’re spinoff businesses, but we view ourselves as being in the hospitality business,” Bruce Forsley said Friday. “So all these businesses are affiliated. We leveraged the strengths of each business to help the others succeed.”

But it all began as a brewpub in Kennebunkport. Two years after founding Federal Jack’s, Fred Forsley and Pugsley launched Shipyard Brewing Co. in Portland. They set up in an old building that had been abandoned for 15 years, in a rundown neighborhood near the eastern waterfront. When they moved into the 5,000-square-foot space, trash and graffiti littered the rooms, Forsley said.

That original space has been expanded several times through the years. It’s now 100,000 square feet of brewing, bottling, retail and administrative office space. And the neighborhood has grown up around the brewery, as well. The Marriott hotel and Ocean Gateway parking garage were built on land Forsley originally bought in 1994.

“We came into the neighborhood when it was pretty rough, but I think its future is bright,” he said.

The brewery recently moved some of its warehousing operations to another site in Portland, which has freed up enough space for perhaps one more expansion, Forsley said.

“We’re pretty close to maxing out the facility,” he said.

The brewery plans to turn out roughly 150,000 barrels of beer this year, Forsley said. The next closest brewery in Maine in terms of production is Allagash Brewing, which produced nearly 35,000 barrels in 2011.

Shipyard long ago left behind the label of “microbrewery,” which is reserved for craft breweries that make no more than 15,000 barrels a year.

Shipyard now is referred to within the industry as a “regional craft brewery,” according to Julia Herz, craft beer program director at the national Brewers Association.

As of July 2012, there were only 81 regional craft breweries in the country, among more than 2,000 total craft breweries of every size, according to the association.

Herz said Alan Pugsley, Shipyard’s co-founder, is well known in the beer world for his work with a yeast strain he brought over from England.

“I would say Alan Pugsley, with the Ringwood yeast, has seriously influenced that area of knowledge and seriously influenced craft brewing,” she said.

Besides just brewing beer for retail distribution, Shipyard also operates several restaurants and brewpubs in Maine. In addition to Federal Jack’s in Kennebunkport, which still brews beer on its premises, the company operates Sea Dog brewpubs in Bangor, South Portland and Topsham; a Shipyard Brew Pub in Eliot; the Shipyard BrewHaus at Sunday River; and the restaurant at the Inn on Peaks Island.

The strategy Shipyard has taken — expanding into the brewpub and restaurant business — is common among the big players in the craft beer industry, Herz said.

But by growing so large — the brewery distributes its beer in 42 states — Shipyard does face challenges.

While the brewery is operating at capacity during the peak summer months, the output drops to about one-third of capacity during the winter when the local population’s thirst for beer dissipates.

“Unfortunately, our production is a big bell curve, so that November through April we are under capacity and we have idle employees and empty tanks,” said Bruce Forsley. “So in order to make the financial model work, we had to find markets that would sustain the brewery in the off-peak season. So we’re really forced into broader based distribution, especially in warmer climates. That’s the nature of our product and being in Maine.”

That challenge has existed since the very beginning, Fred Forsley said, but “The bigger you are, the bigger the challenge becomes.”

The brewery itself employs 86 people, including 35 new hires in the past year.

“The goal is to keep them employed and keep them busy,” Fred Forsley said. “We’d either need to lay people off or come up with a strategy to keep people employed in the wintertime.”

Florida, where the demand for beer during Maine’s winter remains high, has been central to that strategy. The company in January opened a Sea Dog brewpub in Clearwater, Fla., with a second one scheduled to open March 15 in Orlando. It also owns a Shipyard Brew Pub in Winter Park, Fla.

Shipyard also opened a satellite brewery last fall in Memphis, Tenn., mainly to meet the demand in that region for its fall seasonal Pumpkinhead beer, which has become one of the brewery’s best sellers.

Asked what has contributed to Shipyard’s growth, Fred Forsley talks about the culture of the company, the iconic Maine brand, strategic partnerships — such as ones it has with Fess Parker Winery, which markets and sells Shipyard beer in California, and Marston’s Beer Co., which operates several breweries in England — and the ability to seize opportunities when they present themselves.

“You try to play to your strengths and take advantage of opportunities where you’ll fill a niche that isn’t being filled,” he said.

As for the future, Fred Forsley expects to continue growing the brewery’s reach in this country and globally, both on its own and through the partnerships it has with Fess Parker and Marston’s.

In fact, Marston’s is expected to begin brewing Shipyard’s flagship Export Ale in England this summer, Bruce Forsley said, which means the iconic logo of the four-masted schooner soon will be on beer shelves in Europe.

There also has been talk of setting up another satellite brewery or brewpub on the West Coast, perhaps in partnership with Fess Parker, Bruce Forsley said.

“You take advantage of the opportunities thrown at you,” Fred Forsley said. “Because it’s a family-run business, we don’t have to always have a master plan. Our long-term plan is to keep having fun doing what we’re doing and grow smart without taking on too much additional risk.”